An International Perspective on Corporate Social Responsibility, Investor Time Preferences, and Cost of Equity

Breuer, W., Trauzettel, T., Müller, T., & Salzmann, A. (2023). An International Perspective on Corporate Social Responsibility, Investor Time Preferences, and Cost of Equity. International Business Review, 102194.

54 Pages Posted: 6 May 2022 Last revised: 15 Nov 2023

See all articles by Wolfgang Breuer

Wolfgang Breuer

RWTH Aachen University

Torbjörn Müller

RWTH Aachen University - Department of Finance

Till Trauzettel

RWTH Aachen University - Department of Finance

Astrid Juliane Salzmann

Catholic University of Lille - IESEG School of Management; RWTH Aachen University - Department of Finance

Date Written: August 31, 2023

Abstract

For a sample of 25,749 international firm-year observations, we evaluate the relationship be-tween shareholders’ time orientation, firms’ corporate social responsibility, and cost of equity capital. We show that patient institutional investors monitor the CSR strategy of the firms they are invested in, to the effect that the CSR practices of these firms lower their cost of equity capi-tal. Further analyses show that this effect is less pronounced when strong national institutions are in place, which makes monitoring by patient institutional investors dispensable. Our results rein-force the idea that CSR can be beneficial by lowering cost of capital as long as there are ade-quate control mechanisms in place.

Keywords: behavioral finance, corporate social responsibility, cost of equity, cultural finance, time orientation

JEL Classification: A12, F30, G32, M14

Suggested Citation

Breuer, Wolfgang and Müller, Torbjörn and Trauzettel, Till and Salzmann, Astrid Juliane, An International Perspective on Corporate Social Responsibility, Investor Time Preferences, and Cost of Equity (August 31, 2023). Breuer, W., Trauzettel, T., Müller, T., & Salzmann, A. (2023). An International Perspective on Corporate Social Responsibility, Investor Time Preferences, and Cost of Equity. International Business Review, 102194., Available at SSRN: https://ssrn.com/abstract=4099472 or http://dx.doi.org/10.2139/ssrn.4099472

Wolfgang Breuer

RWTH Aachen University ( email )

Templergraben 55
D-52056 Aachen, 52056
Germany

Torbjörn Müller

RWTH Aachen University - Department of Finance ( email )

Templergraben 64
Aachen, 52056
Germany

Till Trauzettel (Contact Author)

RWTH Aachen University - Department of Finance ( email )

Templergraben 64
Aachen, 52056
Germany
+49241 8093654 (Phone)

Astrid Juliane Salzmann

Catholic University of Lille - IESEG School of Management ( email )

Socle de la Grande Arche
1 Parvis de la Defense
Puteaux, Paris 92800
France

RWTH Aachen University - Department of Finance ( email )

Templergraben 64
Aachen, 52056
Germany

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